What is a Free On Board Destination in E-commerce?
Free On Board (FOB) Destination determines who is responsible for the costs related to the product delivery. FOB Destination indicates that the seller is responsible for loss or damage of the product until the products are delivered to the buyer.
Significance of FOB Destination in E-commerce Logistics
FOB (Free On Board) Destination helps e-commerce companies to safe loading of goods onto a vessel at the port of shipment. The significance of FOB destination covers the following –
- FOB Destination is often used in international trade, as it can help ensure that the buyer will not be held responsible for any delays or additional costs that may occur due to shipping.
- For a company’s account, FOB destination plays an important role as it dictates the period of entering the amount into the records.
Prerequisites to Calculate FOB Destination and How It Works
The prerequisites are –
1. Understanding of cost of goods and associated costs: To calculate FOB Destination, you must understand the cost of goods and all associated costs, such as shipping and handling.
2. Knowledge of freight charges: You must also know the freight charges associated with shipping the goods to the destination.
3. Knowledge of the destination: Knowing the destination of the goods is also necessary to calculate FOB Destination.
4. Understanding of the FOB Destination calculation: The FOB Destination calculation is the total cost of goods plus freight charges, divided by the total number of goods.
Use Case With FOB Destination
Assume Company ABC in the Philippines purchases computers from an Australian supplier under a FOB destination agreement. For whatever reason, the computers were not delivered to Company ABC’s location. If Company ABC does not reimburse the supplier, the supplier must reship the computers.
